StakeHound, which issues crypto tokens that allow users to access decentralized finance (DeFi) while being able to earn staking rewards, claims that it has developed “stake-backed” tokens so that digital currency traders can enjoy “the best of both worlds: liquidity and yield.”
StakeHound’s management noted that they issue “stake-backed” tokens for the Ethereum (ETH) and Radix DeFi ecosystems.
As explained in a release shared with Crowdfund Insider:
“Until now, cryptocurrency users had to choose between earning staking rewards by staking their tokens, or retaining token liquidity by not staking, allowing them to participate in things like DeFi and token trading.”
However, StakeHound aims to introduce what it claims are the very first tokens that will let users take part in DeFi and earn staking rewards, at the same time, “unlocking $20 billion in liquidity” for the Ethereum and Radix ecosystems. The StakeHound project has been incubated by Radix, which claims to be the first layer-one protocol for DeFi.
StakeHound aims to offer a liquidity bridge into the DeFi ecosystems on both ledgers.
As noted in the announcement, all major proof-of-stake virtual currencies will be supported, so that their holders can earn staking rewards while being able to access “instant” liquidity.
As noted in the announcement, StakeHound’s “stake-backed” tokens are “issuable on both the Ethereum and Radix public ledger, allowing users to access and move between both DeFi communities seamlessly.” However, the StakeHound team hasn’t mentioned whether this offering is compliant or regulated in any jurisdiction. Most so-called DeFi and staking tokens are either loosely regulated or not at all, which has led to numerous scams.
The release also stated that the advancement of DeFi has created a lot of congestion on the Ethereum (ETH) network due to increased activity. Gas fees on Ethereum have increased dramatically.
According to StakeHound, today’s blockchain networks have not been developed to meet the needs of rapidly evolving DeFi platforms. Radix claims that it can solve this performance issue with its layer-one protocol that has been built to “specifically” serve DeFi by “delivering massive scalability, low-cost secure transactions, sub five-second finality, and synchronous atomic composability across shards for DeFi dApps.”
While it’s true that Ethereum is experiencing technical problems due to network congestion, most solutions like Radix and even much more established platforms like EOS and Tron have failed to attract many users. Blockchains like EOS and Telos are offering greater transaction throughput, but they are not able to leverage nearly the same network effects as Ethereum.
Almost all major DeFi platforms have been launched on Ethereum and this trend will most likely continue, with the launch of Ethereum 2.0, a major system-wide upgrade to the smart contract platform. Blockchain projects like SKALE Network understand or realize that Ethereum is going to continue to dominate the blockchain development market, which is why they’re simply building solutions to complement Ethereum, not compete against it.
Interestingly, StakeHound says its token users “do not need to choose” between accessing Ethereum or Radix with their tokens as StakeHound is “cross-ledger” by default. In other words, the platform’s tokens will work on both blockchains.
As explained in the release:
“Here’s how StakeHound works: users send their chosen Proof of Stake tokens, such as RADIX, Tezos (XTZ), Cosmos (ATOM), Algorand (ALGO), Cardano (ADA) or Polkadot (DOT), to one of StakeHound’s institutional-grade custodian partners. StakeHound then instantly generates and sends the user a one-to-one representation of their original token on their chosen DeFi ledger (Ethereum now, Radix once launched next year).”
After this step is completed, the StakeHound platform does the following:
“StakeHound stakes the tokens it receives, and distributes staking rewards directly to users as additional stake-backed tokens. Users will be able to take their stake-backed tokens and use them in all popular DeFi applications, including Uniswap, Aave, Curve, Synthetix, and more.”
As mentioned in the release, StakeHound users will be able to swap their tokens back for their original tokens. However, users can expect some delays in this process, due to “the nature of staking,” the release stated.
Albert Castellana, CEO at StakeHound, said that staking is an important part of blockchain network security, however, it “creates illiquid positions.” Castellana added that on certain networks, there can be very large minimum stake requirements, which can make things difficult for small holders.
But StakeHound aims to address these issues by allowing anyone “to support the security of the networks they care about, while giving them liquid access to the best DeFi products the market can offer,” Castellana said. He claims that the solution allows “even the smallest token holder to earn staking rewards.”